The Ceding office retains the bottom layer of risk itself and the Reinsurer only have to pay claims above this level. For example, if the cedant had retained Rs. 1,00,000 of a Rs. 10,00,000 risk, the cedant would bear the first Rs. 1,00,000 of each and every loss and the Reinsurers would pay only that part of any claim in excess of Rs. 1,00,000.
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An arrangement whereby two or more Insurers each provide a rupee amount of Insurance coverage, or layer. The Insurer of the first layer is primary, thus responding first in covering a loss above any retention by the insured. Insurers of subsequent layers respond in sequence, as necessary, to cover any large loss. Layers are used in both property and liability Insurance. Also, See Also: “Layering, Reinsurance.”